A Comment -- General Comments From an Expert (A Commentary)

Markets. There were 2 bull markets after the 2^nd world War. Two charts comparing 1949-1959 and 2009-2016 show that markets work themselves higher, but in a zigzag fashion. We are currently in a consolidation period, similar to what we had 1949-1959. The market went higher in the 60s. It started below 80 and went to 1000. In this market move, we started around 8000, so we have a long way to go. In the 1^st wave people are very tentative because they don’t want to go through again where the whole market falls out of bed. Global GDP growth is all positive with an average 2.7% growth. You can’t have a bear market when the global economy is getting stronger.

US$. Feels that the rally for the US$ is dead now. In the currency markets you get long moves, we have had a good move in the US$, and he thinks it has topped at least in the mid-short term. There is going to be a rollover, and that is going to allow all the things that were negative, when the dollar was going up, to get reversed and get positive again. We should now get a relief rally.

Lithium? If Tesla’s Musk can come up with the battery pack, which was promised some time this year, that changes everything, including the automobile business, energy storage, etc. He would be from Missouri for the time being, until there is proof that it works. If it does, this is an area you want to look hard at.

Markets. 17 years on Market Call! We had a nice pullback on the US$. We have seen in it commodity prices. He thinks the US$ will retrace back to its previous highs. This is a long term story. The US really wants to raise rates, but the world and China especially is saying they can’t put up with a strong US dollar. We went from risk off to risk on in Mid-February. In risk off you want the safest assets. The US election is this year. Normally the election year is good and the president’s first year is a tough year.

EBV lines creator. The original work goes way back. He thinks balance sheets are way more important than income statements. He made the model price algorithms his own.

Markets. We are at a resistance point, but there is enough good news out there. We need something positive on the energy side and that would probably carry the TSX through that resistance point. He would hope to see 2%-3% in this next quarter, but we are in a slow growth period. You can’t expect equities to take off when we are talking about 1.5%. Expects we are going to be closer to 2% GDP growth this year. Has been disappointed in the banks this year. The big Shorts out of New York haven’t helped. There have been a lot of Canadian managers that have been red hot on US banks, particularly the regional ones, and he thinks they were wrong. The new rules on lending in the US are really hamstringing a lot of the regional banks. They are going to be dead for a while.

Gold? He used to be a gold holder, but doesn’t own any at the moment. He is a traditionalist in that you really get into gold when you see problems with inflation. He could see people getting concerned because of negative interest rates. It has had a nice run, but will probably have to give some of it back.

Market. The S&P 500 is in a zone, and has kind of broken through, getting into a resistant zone of $2015 - $2021. To break up through that would be very significant and very positive, but it is going to take a bit of time. We are coming into earnings season’s, tons of idiosyncratic risks, and a lot of things to pay attention to. On a positive note there has been the largest reduction in earnings estimates going into this quarter since the financial crisis, which sounds terrible, but if the market has held in and is in a resistance zone and you have set the bar low, that can be positive. The hardest thing to do is “nothing”, and sometimes that is the right thing to do. The earnings season is coming up, questions about the Fed raising rates or not in June, the UK staying in Europe. You also have the GOP convention coming up in July. These are very significant catalysts coming in the near term.

Markets. He looks at a number of different things, top down and both economic and market indicators. A couple of months ago he was fairly negative on a lot of the things he saw and had a fairly big cash position in his portfolios. He watches earnings closely and tends to be fairly active around earnings.

Market. The market does strange things during a US presidential election year. A chart showed that from the beginning of April through until the end of May, markets tend to go lower. This is because we don’t know who are going to be the final candidates prior to the convention. By the time we get to the end of May it is pretty well figured out, and the market goes higher through until September. By that time, we know who the final 2 candidates are, and they try to make nice and try to consolidate their party behind them. Everything is positive at that time. The conventions come at the end of July, and by September the brickbats come out. This year is going to be particularly difficult because they changed the US election laws and the super PACs are no longer limited at funding the advertisers. Early September until just before election Day the market goes down because of uncertainty. Then you have a president who has a mandate and people come behind him, and the market closes on the upside for the year. (Economic and earnings cycle looks much better in Canada than it does in the US.)

“Sell in May and go away” for this year? This is a controversial question. On a long-term basis, the average date to Sell in both the US and Canada is May 5th. This is assuming that markets are going to go lower until the end of October. Statistics show that it doesn’t necessarily play that way. On average there are more years when the market actually goes higher during that time. “Sell in May and wait until there is a period of volatility.” is more appropriate. Between May and October, virtually every year, there is something that happens completely out of the blue. Last year was China, the previous year was Greece, and previous to that it was Europe. The key is to watch volatility very closely. If you see volatility “CBOE Volatility (VIX-I)” start to spike, then you get out.

Markets. This is the beginning of US earnings season. The big news tomorrow is going to be the US banks. Whatever the results, it will set the tone for the market. Everybody is going to be looking at the investment banking earnings. It was a slow quarter for Initial Public Offerings. People are going to be looking at the proprietary trading. Also, everybody’s concerned about write-offs and reserves in the oil/gas industry. There has been a lot of chatter about banks being overexposed, particularly to the tertiary, low quality producers, and whether that will impede their performance. In his view, the big US banks have been sold off so radically that the market is really anticipating lousy results, so anything good should lead to increases in prices.

Steel stocks? There is a lot of capacity in the industry. China is talking about shuttering steel plants because they have too much capacity. One of the reasons coal has plummeted is that there is too much steel in the world. Because of this, you have to be pretty brave to buy into this rally, and believe that the steel companies have a future ahead of them.

Markets. Loan quality is back in focus with Italian banks. They are talking about a tarp-like clean up of the banks there. This does not fix the underlying problem with QE and negative interest rates. It is a demographic problem. You can’t expect a 60 year old to go out and borrow money to spend because of low interest rates. Whatever they are doing is not working. The EU does not work and eventually it will break apart. It could be years, though. There will be periods of failed rallies. China is coming in under the radar to inject liquidity into the market via lending. They really have to re-think how they stimulate growth. China would be growing at 3% a year if it was not for all these programs.

Taking Profits. He has been recommending taking some money off the table recently. He would take profits on an ETF that reflects the broader markets. He would not sell individual stocks to raise cash.